Why the prices of medical aid are rising in South Africa


South Africans should prepare for an increase in medical aid rates in 2022 as inflation and other factors kick in, said Alexia Graham, director of Hippo Advisory Services.

Graham said medical aides are basing their rate hikes on a combination of the expected and the unexpected. Inflation, for example, is an expected factor, with the South African Reserve Bank (SARB) setting the Consumer Price Index (CPI) at 5.0%.

“The private healthcare sector in South Africa has come under pressure in recent years due to factors such as the regulatory environment, the state of the economy and the impact of the Covid-19 pandemic Graham said. “Medical plans that demonstrate clear growth, stable reserves and good governance are better prepared for loss volatility.

“The sustainability of a medical plan depends in large part on its ability to increase the number of its members with young and healthy lives. The Council for Medical Schemes also requires plans to achieve minimum solvency levels of 25%, which is difficult in highly regulated environments and exposed to uncontrollable factors. “

It is precisely these uncontrollable factors that are causing the rate hike in 2022, Graham said.

She added that the potential implementation of NHI as a competitor to private-sector healthcare in the future could also put smaller plans under the pressure of long-term survival, which could lead to a consolidation of the market. industry. However, it may take a while to have an effect, she said.

Impact of Covid-19

Graham said the biggest uncontrollable factor for medical assistants is still Covid-19.

“The pandemic is a perfect example of an unexpected and inevitable crisis affecting the health sector and risk management, access to appropriate care and the structuring of the benefits of medical aid schemes.

“The annual increase in the price of a medical aid product is influenced by members’ claims experience on that product and the expected spending for the upcoming benefit year. “

The pandemic challenges programs to manage associated treatment costs, as well as to prepare for the impact of associated co-morbidities and lingering effects of Covid-19, Graham said.

“Although we have seen a sharp increase in the cost of a Covid hospital admission compared to a standard hospital admission during the pandemic, plans have seen a reduction in standard admissions due to the postponement. planned procedures.

“The resulting unexpected claims dynamic with each wave creates a pricing challenge for all medical aid plans. Members are experiencing changes in the way physician assistants typically manage their annual adjustments, with plans postponing their rate increases until later in the year. While this may provide temporary relief, a price increase is inevitable. “

For medical plans, these challenges are compounded by the need to stay competitive, which is why some have introduced new product options aimed at younger, healthier families, she said.

Costs

What does all of this mean for South African consumers?

Hippo has provided the following table which shows the premium costs for single members and for small families (member plus dependent adult plus child) in entry-level offerings of five major South African free market medical plans.

“Given the state of flux in the market and the inconsistency in timing of increases in the industry, it is important to remember that we are cashing rand and not percentages, so it is extremely important to compare products and prices. Graham said.


Read: The hidden cost of getting Covid-19 in South Africa: the boss of medical aid


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